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NT2 – 4Q21 net profit retreat due to high gas price – Earnings Update

Company Note 25/01/2022    74

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  • NT2 posted a 22.8% yoy increase in 4Q21 revenue but 4Q21 net profit dropped 40.4% yoy due to 46.7% yoy surge in gas price.
  • In FY21, NT2 recorded a revenue/net profit of VND6,149.6bn (+1.1% yoy) and VND565.8bn (-14.6% yoy), fulfilling 102%/82% our FY21 forecast.
  • We forecast FY22F net profit to surge 47.5% yoy thanks to strong recovery (+27.5% yoy) in power production.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND22,500

N/A

8.9%

N/A

            POWER

4Q21 recap: Gross profit margin hampered by gas price surge

  • NT2’s 4Q21 power output continued to drop 14.7% yoy due to low electric load in the South and EVN prioritized to mobilize from other power sources (hydropower and renewable energy (RE) power). Thanks to the 32.8% yoy rise in 4Q21 average selling price (ASP) to 1,981VND/kWh, 4Q21 revenue increased 22.8% yoy to VND1,634.6bn.
  • However, gross profit margin hampered 12% pts yoy, causing by 46.7% yoy upsurge in gas price.  Financial expense declined 91.2% yoy to VND4.4bn as NT2 has fulfilled its foreign debt obligation since 2Q21.
  • As a result, 4Q21 net profit decreased 40.4% yoy to VND121.1bn.
  • For FY21, NT2’s revenue increased 1.1% yoy (in-line with our forecast) on the mix of a 18.2% yoy decrease in output and a 29.0% yoy surge in ASP. However, higher-than-expected gas price led to higher COGS, causing a lower-than-expected gross profit of VND675.8bn (fulfilling 84.5% our forecast). Hence, FY21 net profit dropped 14.6% yoy to VND533.8bn, completing 82% our expectation.

We expected NT2 output will recover in FY22F 

  • We believe NT2 output will bounce back in FY22F thanks to (1) Electricload recovery in the South post Covid-19, (2) Brent oil price forecasted at 75US$/barrel, helping gas price to stable from 2022F. We also see the curtailment risk in gas-fired power from additional 3980MW of wind power, however, the strong rise in power consumption will soon cover the excess capacity in upcoming years. Hence, we forecast FY22F revenue and net profit to reach VND7,293bn (+18.5% yoy) and VND788bn (+47.5% yoy), respectively.
  • In FY23F, revenue and net profit expected to slightly decrease due to overhaul plan, and only reach VND7,007bn (-4.0% yoy) and VND697bn (- 11.8% yoy), respectively

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